With India-Pakistan ties deteriorating further, a fresh wave of uncertainty has gripped Indian equities, leaving the Sensex and Nifty 50 on a volatile footing
On May 7, the Indian stock market woke up to an unexpected news—of India launching targeted attacks at nine terrorist sites in Pakistan and Pakistan Occupied Kashmir, touting it as ‘Operation Sindoor’. While investors were already sailing through uncertainties emanating from Trump’s tariff wars, jitters hit home this time as the Indian Army’s ‘Operation Sindoor’ marked a new low for ties between India and Pakistan.
The response? Indian benchmarks, the 30-stock Sensex and Nifty 50 opened more than half a percent lower each. A wave of concern over the future trajectory of the India-Pakistan crisis, coming at a time when investors were already jittery in the run-up to the Federal Reserve’s rate outcome and commentary, together increased volatility in the market.
While markets were quick to stage a swift recovery from their opening lows, jumping into the green territory, those gains proved to be short-lived, with the indices soon slipping back into the red. Since then, markets have been on a turbulent ride, swinging between gains and losses as risk aversion spread among investors.
For now, all eyes remain on the press briefing by the government as investors eye for more updates on the India-Pakistan crisis.
With much for the markets to chew on in today’s session, Devarsh Vakil, Head of Prime Research, HDFC Securities, believes the language and any signs of further escalation between India and Pakistan will remain on the radar.
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Taking on a more optimistic look, VK Vijayakumar, Chief Investment Strategist, Geojit Investments feels that the focused and non-escalatory nature of ‘Operation Sindoor,’ stands out from the market perspective. However, he too suggests investors to take on a wait and watch approach for now.
"We have to wait and watch how the enemy reacts to this precision strikes by India. The market is unlikely to be impacted by the retaliatory strike by India since that was known and discounted by the market,” Vijayakumar added.
Moving on, he expects the markets to remain resilient in the face of the India-Pak tensions, largely banked upon the sustained foreign institutional buying from the last 14 sessions. He further sessions. “FIIs are focused on the global macros like weak dollar, slower growth in US and China in 2025 and India’s potential outperformance in growth. This can keep the market resilient. However, investors have to watch the developments in the border,” Vijayakumar said.
Having said that, the sentiment might tilt in favour of large-caps more at the current juncture, with investors likely to exit small and midcap stock amid persisting turbulence.
A snippet of that trend was also seen in today’s session thus far, as the Nifty Smallcap 100 and Nifty Midcap 100 logged also logged in losses, falling up to 0.5%.
Meanwhile, focus also remains on the Federal Reserve's policy decision, due later today, where investors will be looking out for Jerome Powell's comments on inflation and growth targets amid Trump's trade uncertainties.